Nov_9_2006_slides

Nov_9_2006_slides - ORIE 350 November 9 2006 Responsibility...

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ORIE 350 November 9, 2006 Responsibility Accounting
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Definition Responsibility Accounting : accumulating and reporting financial data on the basis of the authority to make the day-to-day decisions about the items.
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Responsibility Accounting Can be used at each level of management where: 1. Revenues and expenses can be directly associated with the specific level of management responsibility. 2. Revenues and expenses are controllable at the level of responsibility with which they are associated. 3. It is practical and possible to develop performance reports to evaluate the manager’s effectiveness at that level.
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Responsibility Accounting Responsibility accounting is especially valuable in a decentralized company, where control is delegated to many managers throughout the corporation. Each manager may be in charge of a business segment . Segment performance reports should emphasize or include only those items which are controllable by the segment manager. A cost is controllable if a manager has the power to incur it within a given period of time.
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Controllable Costs The longer the time span, the more likely the cost will be controllable. Higher in the organization: all costs are controllable. Lower in the organization: fewer costs are controllable.
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